Apple Q4 profit reaches $106 mln

Company ships more than 2 million iPods during period

SAN FRANCISCO (CBS.MW) -- Apple Computer shares surged 6 percent in after-hours trading Wednesday after it said sales of more than 2 million iPod digital music players helped lift its fourth-quarter net income to $106 million, more than twice what it earned a year ago.

"The investments we have made are starting to pay off through higher revenue and operating margins," said Apple Chief Financial Officer Peter Oppenheimer, on a conference call with analysts.

Apple
AAPL, -0.32%
said it earned 26 cents a share on revenue of $2.35 billion. During the same period a year ago, Apple reported net income of $44 million, or 12 cents a share, on revenue of $1.72 billion.

Excluding $4 million in after-tax restructuring charges, Apple earned $110 million, or 27 cents a share, to beat the estimates of analysts surveyed by Thomson First Call of a profit of 18 cents a share on $2.15 billion in revenue. Operating margins climbed above 5 percent.

In after-hours trading, Apple shares climbed to $42.17 after closing the regular market session at $39.75.

IPod leads the numbers

Apple said it continued to reap more success from its iPod digital music player, shipping more than 2 million iPods in the quarter. IPod shipments grew about 500 percent from 336,000 during the same period a year ago. Oppenheimer said Hewlett-Packard's
HPQ, -0.23%
version of the iPod accounted for 6 percent of total iPod sales.

The strength of the iPod on Apple's financial health was emphasized by the $537 million in revenue the iPod contributed to the company's results. IPods now make up the largest individual portion of Apple's product revenue.

Apple also said it shipped 836,000 Macintosh computers, up from 787,000 a year ago. Oppenheimer said that iPod sales are having a so-called "halo effect", and bringing new customers to the Macintosh.

"We continue to sell still, (in) retail stores today, close to 50 percent of computer sales are to people who are either buying the PC for the first time are or new to (the) Mac," Oppenheimer said "And I think one of the big reasons is the halo effect that the iPod and music is having."

Oppeheimer said Apple's retail stores accounted for $18 million in profit and $376 million in sales during the quarter. The company had an average of 81 stores open during the quarter, and has set a target of having 100 stores open by the end of the year. As part of its retail strategy, Apple plans to open new "mini-stores" that are about half the size of its typical stores.

Going forward, Oppenheimer said the company expects to post a first-quarter profit between 39 cents and 42 cents a share on revenue between $2.8 billion and $2.9 billion. Wall Street analyst had estimated Apple would earn 28 cents a share on revenue of $2.52 billion.

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